Blockchain and NFTs continue to be transformational technology innovations, impacting multiple business sectors, including the video gaming industry. NFTs provide a mechanism for driving engagement from gaming through the use of tokens for in-game digital assets. The ability for players to truly own game assets is creating entirely new business models and monetization opportunities for game developers that will have a drastic impact on the gaming industry as a whole.
Being able to own in-game digital assets provides a massive opportunity for gamers looking for greater value and innovative new experiences. Game developers who will succeed in this changing landscape understand the opportunity to give players more control, create more opportunities for players to earn new assets, and support the value NFTs can create beyond the in-game economy.
Let’s look more closely at the growing influence of Web3 concepts, like NFTs, cryptocurrency, and blockchain, on video game development. In the end, these new business models only make a difference if developers get creative in making their games with compelling environments where gamers want to spend their money.
Half-baked Second Life rip-offs need not apply. Consequently, video games no longer just entertain. Instead, they provide immersive worlds where the line between reality and fantasy continues to blur.
A recent study notes the number of active video gamers across the globe topped the 3 billion mark in mid-2021. Another study reported the global video game industry generated over $180 billion in revenue last year. The latter number shows a 20% increase since the COVID-19 pandemic. A high-level view reveals humans increasingly want to leave the real world for a virtual gaming universe. Notably, mobile gaming remains the leading driver of this revenue growth, a platform that largely relies on in-app purchases for sales.
It’s not surprising that many video game companies look at this mobile gaming business model and figure something similar is applicable to video games within a metaverse. Additionally, the growth of mobile app stores and related digital distribution networks offer the chance for smaller development companies to get in the game, so to speak. This growth potential of the gaming market is truly worldwide. Not surprisingly, the Asia-Pacific market dominates, boasting 55% of all video gamers.
China accounts for 25% of all gaming sales. Other global regions are also showing strong growth rates in the range from four percent to ten percent. Surprisingly, only North America shows slow growth at only 0.7%.
Over time, the video game industry relied on various business models to generate revenue. The Pay-to-Play (P2P) model provided a relatively basic concept. If you wanted to play a video game, you simply bought a copy for your chosen gaming machine. It’s the environment that led to the boom and bust of Atari, Mattel, and Coleco, along with eventual resurrection of the market under Nintendo, Sega, and Sony. Free-to-Play (F2P) gaming came into its own in the late Aughts, driven by the massive growth of the smartphone.
As noted earlier, in-app purchases and in-game advertising provide nearly all of the revenue for these freemium video games. Again, unlocking new features or characters with purchase is an attractive concept to game developers eyeing blockchain and NFTs. A relatively new video gaming business model, the Play-to-Earn (P2E) model fully leverages in-game blockchain, NFTs, and cryptocurrencies. Gamers get the opportunity to earn tokens or in-game currency within the game.
They typically earn more as they progress further within the game. Players can then use these in-game coins to purchase assets such as new items or characters, which can all be NFTs. In-game economies aren’t anything new and are a major part of the F2P model. NFTs allow gamers to resell these assets on secondary markets.
This is the first time gamers are able to take items they’ve unlocked through time and play and move them outside of the game.Thus, more gameplay ultimately leads to higher earnings in both the real world and the metaverse. Combining entertainment with revenue generation in this manner offers new kinds of benefits to both the game development companies and the gamers themselves.
With NFTs, game developers can offer endless new opportunities for gamers to leverage their digital assets and drive new value. Again, gamers also have the ability to resell these assets on secondary markets. This approach offers gamers a real sense of ownership, making it easier to spend actual money within the game, albeit with cryptocurrency. It also makes these new virtual worlds feel more like real-life, which is an important factor in generating engagement with the game.
At the same time, modern games using the P2E model take advantage of more traditional concepts found in games and collecting. For example, some games let users collect and trade in-game assets in a similar manner as baseball cards. Other games follow a train and battle model not too dissimilar from the original Pokémon. Leveraging older business models in this fashion lets players feel more comfortable with the new models and unfamiliar concepts, like blockchain and NFTs.
Another new application of blockchain gaming is the use of NFTs as staking assets. NFT holders can monetize their digital assets to earn passive income in the form of tokens, rewards, or in-game benefits. This creates a new investment opportunity for gamers beyond simply trading and selling game assets.
As with any transformative technology innovation, opportunities for massive growth exist along with a strong bust potential. In short, it’s a business environment very similar to the late-70s video game industry. Blockchain and NFTs provide game developers with massive earnings potential, but only if they offer gamers a truly compelling experience. One difference offered by blockchain relates to the concept of ownership. In current F2P games, any in-game assets earned by the gamer simply go away if the video game publisher decides to make changes or goes out of business.
In a P2E game powered by blockchain, those assets are truly owned by the player and provide a greater level of value and transferability. In fact, gamers are able to sell these assets on the open market. Ultimately, a new wild west of the gaming industry is upon us. However, game development companies hoping to thrive in this new environment still need to provide an enthralling environment to gamers. This is no different than those halcyon days of the late 2000s or even the 1970s.
If your company has a great idea for a game that leverages NFTs but lacks the technical know-how, connect with the team at Gigster. We boast state-of-the-art technical skills and well-tested game development methodologies. Partner with us to ensure your game idea reaches the widest possible audience while making a transformational impact on the industry.